I want to share a story about Enron, a little company that became one of the most powerful corporations in history, only to disappear in a flash due to fraud. While many are familiar with the basics, I think it's worth reviewing the details.
At its peak, Enron was hailed as America’s most innovative company and was the only one to appear on the cover of Fortune Magazine twice. The CEO was celebrated as a hero, and the company was ranked as the top employer in the nation. A great documentary on this topic is titled "The Smartest Guys in the Room," which highlights Enron's shady business practices, political connections, and eventual downfall. The executives were widely regarded as 'geniuses' by the media and shareholders.
However, after a decade of impressive growth, some accounting experts began questioning Enron's numbers. It turned out that they were involved in the largest accounting fraud in US history, with even their reputable accounting firm, Arthur Anderson LLP, signing off on their manipulated figures. As Enron’s stock started to crash, insiders including executives and early investors began selling off their shares while urging employees not to do the same. Many employees had invested their lives into the company and relied on their stocks for retirement. Ultimately, Enron became infamous for its massive corporate bankruptcy, with the fallout largely mitigated due to its connections with influential figures in the White House.